Wow... very nicely done. I'm not sure you could have made that look any closer to the original.
And despite the back being a lot busier than the MCD one, I really like it. It all just seems to... fit together more naturally than the MCD back, I think.
Having thought about it, one of the problems I have with it might be the placement of the back image. Maybe if it ended above the Compact Disc and UK Version logos? I don't know. It's not that big of an issue, really. I mean, if I find that the back is really bothering me [which I doubt it would], I can always just edit the covers as I see fit.
As far as the front and spine are concerned, I definitely prefer the watermarked version. Especially seeing the three types next to each other. It fits in well with the second MCD and the 32X covers. And the front just looks too bare without it, especially if compared to the other two covers.
Since typing that, I've printed out the watermarked cover. Disregard all I said.

The watermark nicely fills up the empty areas, but doesn't stand out as much as it does in the Imandix previews. And although I still think the back image might be better ending above those logos, it's so much of a non-issue when you're actually looking at the cased cover that I'm not really sure it's worth bothering about. Great job on this template, Grumbleduke.
As for Doom's comment about the 32X spine, I can see how on some games it could be problematic. However, unless you go for a split-section spine like the Gamecube and PS2 etc, with the '32X' pattern only in the 'Mega-CD 32X' section, there's not really much you can do. And that wouldn't work, because then the back/front continuation of it would be broken. An alternative would be to use the opposite spine of the cd case, which is plain black [on Night Trap, anyway] but plain black spines are pretty boring. Perhaps you could fade it on the spine?
Personally I like the current spine as it is, but I only have one Mega-CD 32X game [for now, anyway] so I'll leave it up to people with more of them to decide.